16 March 2009

I have been critical of the Democratic congress' failure to make progress in the area of free trade. Now the Obama administration is furthering the damage to free trade reputation with their decision to close the borders to Mexican trucks. This is a violation of the North American Free Trade Agreement.

We should recall the criticism levied against the Bush Administration for their abandonment of the Kyoto Protocol. Kyoto, although signed by the Clinton Administration, was never ratified by the U.S. Congress. In NAFTA we have a duly signed and ratified agreement that is being violated for no defensible reason.

Mexico said it would increase tariffs on 90 industrial and agricultural goods, likely to include politically sensitive farm products, after Congress last week killed a pilot programme allowing a limited number of Mexican trucks on American highways. Mexico obtained a judicial ruling in 2001 under the North American Free Trade Agreement (Nafta) allowing it to impose such sanctions, but has held off since the US introduced the pilot scheme.The sanctions, which Mexican officials say are set to be imposed later this week, will be one of the largest acts of retaliation against US exports. US goods exports to Mexico totalled $151.5bn last year. On Monday, Gerardo Ruíz Mateos, Mexico’s economy minister, said: “We believe that the action taken by the US is wrong, protectionist and in clear violation of Nafta.”The White House said on Monday it would seek to create a new programme that would address what it called the “legitimate concerns of Congress” while meeting the US’s Nafta commitments. But Mexican officials said they would not be bought off with promises.The pilot programme has been opposed by many lawmakers and by the Teamsters Union, which says that Mexican trucks are unsafe. Because they are largely restricted to short-run hops over the border, most Mexican trucks entering the US are run by so-called “drayage” operations that use older vehicles more likely to fail inspection tests. But a study funded by the US Department of Transportation found that when comparing like with like, Mexican trucks were often safer than their US counterparts.

It seems like the President and Congress have forgotten the danger of protectionism in periods of economic weakness. Although this measure does not rise to Smoot-Hawley levels, it weakens trust with an important trading partner and damages our credibility on free trade.